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Welfare Reform, Saving, and Vehicle Ownership: Do Asset Limits and Vehicle Exemptions Matter?

  • James X. Sullivan

    ()

    (University of Notre Dame)

This paper examines whether AFDC/TANF asset tests affect the asset holdings of low-educated single mothers, exploiting variation in asset limits and exemptions across states and over time. There are important reasons to examine vehicle assets in this context. For example, vehicles make up a very significant share of total wealth for poor families, and the variation in vehicle exemptions over time and across states far exceeds the variation in asset limits. Consistent with other recent research, I find little evidence that asset limits have an effect on the amount of liquid assets that single mothers hold. However, I find evidence that vehicle exemptions do have an important effect on vehicle assets. The findings suggest that moving from a $1500 vehicle exemption to a full vehicle exemption increases the probability of owning a car by 20 percentage points for low-educated single mothers relative to a comparison group. Also, the results indicate that single mothers are not substituting vehicle equity for liquid assets in response to more relaxed restrictions on vehicles.

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Paper provided by W.E. Upjohn Institute for Employment Research in its series Upjohn Working Papers and Journal Articles with number 05-117.

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Date of creation: Jun 2005
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Handle: RePEc:upj:weupjo:05-117
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  1. Cynthia Bansak & Heather Mattson & Lorien Rice, 2005. "On the Road to Self-Sufficiency after Welfare Reform: An Assessment of the Impact of Changes in Welfare Asset Limits on Auto- Ownership Rates and Employment," Working Papers 0001, San Diego State University, Department of Economics.
  2. Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, The Earned Income Tax Credit, And The Labor Supply Of Single Mothers," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 1063-1114, August.
  3. Powers, Elizabeth T., 1998. "Does means-testing welfare discourage saving? evidence from a change in AFDC policy in the United States," Journal of Public Economics, Elsevier, vol. 68(1), pages 33-53, April.
  4. J. Gruber & A. Yelowitz, . "Public Health Insurance and Private Savings," Institute for Research on Poverty Discussion Papers 1135-97, University of Wisconsin Institute for Research on Poverty.
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  6. Steven Raphael & Lorien Rice, 2000. "Car Ownership, Employment, and Earnings," JCPR Working Papers 179, Northwestern University/University of Chicago Joint Center for Poverty Research.
  7. Jesus Fernandez-Villaverde & Dirk Krueger, 2004. "Consumption and Saving over the Life Cycle: How Important are Consumer Durables?," 2004 Meeting Papers 357b, Society for Economic Dynamics.
  8. Hubbard, R Glenn & Skinner, Jonathan & Zeldes, Stephen P, 1995. "Precautionary Saving and Social Insurance," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 360-99, April.
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  10. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May.
  11. Erik Hurst & James P. Ziliak, 2001. "Welfare Reform and Household Saving," JCPR Working Papers 234, Northwestern University/University of Chicago Joint Center for Poverty Research.
  12. James X. Sullivan, 2008. "Borrowing During Unemployment: Unsecured Debt as a Safety Net," Journal of Human Resources, University of Wisconsin Press, vol. 43(2), pages 383-412.
  13. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Illusory Effects of Saving Incentives on Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 113-138, Fall.
  14. J. P. Ziliak, . "Income Transfers and Assets of the Poor," Institute for Research on Poverty Discussion Papers 1202-99, University of Wisconsin Institute for Research on Poverty.
  15. Neumark, David & Powers, Elizabeth, 1998. "The effect of means-tested income support for the elderly on pre-retirement saving: evidence from the SSI program in the U.S," Journal of Public Economics, Elsevier, vol. 68(2), pages 181-206, May.
  16. George-Marios Angeletos, 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer.
  17. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," NBER Working Papers 8983, National Bureau of Economic Research, Inc.
  18. Steven Raphael & Michael A. Stoll, 2000. "Can Boosting Minority Car-Ownership Rates Narrow Inter-Racial Employment Gaps," JCPR Working Papers 200, Northwestern University/University of Chicago Joint Center for Poverty Research.
  19. Ellwood, David T., 2000. "The Impact of the Earned Income Tax Credit and Social Policy Reforms on Work, Marriage, and Living Arrangements," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1063-1106, December.
  20. Jeffrey E. Zabel, 1998. "An Analysis of Attrition in the Panel Study of Income Dynamics and the Survey of Income and Program Participation with an Application to a Model of Labor Market Behavior," Journal of Human Resources, University of Wisconsin Press, vol. 33(2), pages 479-506.
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